A shock profits warning from Premier Foods has crushed hopes of a turnaround at Britain's biggest food manufacturer. Its shares nosedived 22% to 19.02p after it admitted that it had lost a pie contract with Marks & Spencer and had been battered by soaring commodity costs.

The debt-laden firm behind Hovis bread, Mr Kipling cakes and Branston pickle said trading profit would be £65m to £70m in the first half, compared with £94m in the same period last year and analysts' forecasts of £86m. It blamed a 14% rise in prices for commodities such as wheat and tinplate – equivalent to a £150m increase in a full year – and the time lag before it could "reprice" its own products accordingly.

The group's price rises upset one big client, believed to be Tesco, which delisted many of its grocery lines. This cost Premier Foods £10m in the first half, although it said the issue had been resolved and the products were back on the shelves – at the higher price. A similar situation is thought to have arisen in November, also with Tesco.

On top of that came a 5% decline in the grocery and bread markets, which Premier blamed on weak consumer spending and "unseasonably warm weather". Its Brookes Avana division saw profits fall £10m, including a £5m charge for restructuring at its Leicester plant – with the loss of 200 jobs – due to losing a £30m pie contract with M&S to rival Samworth Brothers. However, it has since picked up enough business with new customers to make up for that loss, and has also won new contracts from M&S, but not for pies.

This did little to reassure Clive Black at Shore Capital. "Just as we thought, after several years of caution and concern on our behalf that matters may have been bottoming out for the company, Premier Foods has produced one of the most surprising and disappointing updates for even this battered venture.

"In this respect, we feel sympathy for Jim Smart [chief financial officer] who has done much to soothe some of our concerns on Premier in the last year or so. However, this update reignites old demons about the fundamental nature and state of this company."

Robert Schofield, the chief executive, who is to retire in a year, went on a debt-fuelled acquisition spree that saw the company's share price fall a long way from the 215p it floated at in 2004. Premier Foods said: "Given the state of the economy and pressure on consumer spending, we expect these slow market conditions to improve on the first half but to continue to be down year on year in the second half."

Polly Barclay, a JP Morgan analyst, slashed her pre-tax profit estimate by a quarter to £105m this year.

Meanwhile, the family-owned bakers Warburtons said on Thursday its profits had been hit by fierce competition, which forced it to increase promotions and discounts to hold on to its slice of the market. Turnover was down to £492m from £510m in the year to September 2010, while pre-tax profits fell to £28.8m from £33.9m. It was also hit by a fire at its Bolton bakery.